The UK August CPIs Overview
The cost of living in the UK as represented by the consumer price index (CPI) is due later on Wednesday at 0830 GMT. The headline CPI inflation is expected to accelerate to 0.5% inter-month in August while the annualized figure is seen ticking lower slightly to 2.4%. The core inflation rate that excludes volatile food and energy items is also expected to have softened to 1.8% last month.
Deviation impact on GBP/USD
Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 15 and 80 pips in deviations up to 2 to -3, although in some cases, if notable enough, a deviation can fuel movements of up to 120 pips.
How could it affect GBP/USD?
A positive surprise in the UK CPI figures is likely to offer the much-needed impetus to the GBP bulls, that could help the rates retest the seven-week tops at 1.3175, above which the upside targets lie at 1.3210 (daily R2/ Fib R3) and 1.3250 (psychological levels).
On a bigger-than-expected drop in the headline and core readings, the GBP/USD pair could fall to the 100-DMA support at 1.3102 below which floors open up for a test of 1.3076 (d10-DMA) and 1.3026 (Sept 13 low).
Key Notes
UK: Slight downside risks for inflation data - TDS
UK CPI amongst market movers today – Danske Bank
GBP/USD Forecast: 100-DMA continues to cap ahead of UK inflation figures
About the UK CPI
The Consumer Price Index released by the Office for National Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or Bearish).
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